CIMB: Sembcorp Industries could list its Indian operations

Sembcorp Industries could list its Indian operations under SEIL, CIMB said in a note on Tuesday.

It pointed to Monday’s announcement of plans to reorganise its India energy operations to a more streamlined shareholding structure and for greater synergy, combining the thermal and renewable energy businesses into one entity.

“We think the reorganisation is a precursor to a listing of its Indian assets,” CIMB said, noting that Indian media has reported a potential listing of the Indian operations, which could see Sembcorp raises as much as S$500 million to S$600 million.

CIMB estimated an equity value of SEIL at around S$1 billion to S$2.3 billion, but expected Sembcorp to retain an around 40 percent stake in the unit.

The bank also estimated that the move would reduce the Singapore company’s net gearing to 0.6 times, from 1.1 times currently, based on its net debt of around S$3.6 billion as of nine-month earnings for last year.

A listing would also boost Sembcorp earnings as it estmated interest costs for the Indian assets are around S$400 million per annum, CIMB said.

CIMB rates Sembcorp Industries at Add, with a S$3.87 target.

Sembcorp Industries’ shares were up 1.83 percent at S$3.34 at 11:48 A.M. SGT.